Page:Harvard Law Review Volume 32.djvu/638

602 The true nature of a share of stock in a corporation is its conferring of membership in the corporation itself. The stock is a creature of the law that created the corporation, and its ownership depends solely upon the provisions of that law. The right of the owner of the stock is therefore, although intangible, a right especially created and guarded by the law of one state, is always within the power of that law, and must be regarded as within its taxing power. This, says the Supreme Court of the United States, is "the law of the property." It is accordingly held that a state which charters a corporation may tax the shares of its capital stock, even though owned by a nonresident.

Judge Baldwin, in State v. Travelers Insurance Co., thus expressed the reason for the rule:

"There is nothing in the objection urged in the demurrer to the complaint, that the law in question 'attempts to impose a tax upon personal property outside the jurisdiction and beyond the territory of the State.' Each non-resident shareholder participates in the enjoyment of a franchise granted by this State, and has an equitable interest in property which is protected by this State, and whose legal owner (the defendant) is one of its own citizens. The sovereign power which gave his shares a being could also give them a situs within its territory for purposes of taxation."

A few states do not permit this tax; but the cases must be supported on the ground that the statute of the state does not permit it, and not on any lack of power in the state to tax.

In the case of a corporation which is incorporated in more than one state, with one set of shares covering the entire stock, it may be necessary to divide the entire value of each share among the states. Each state which has issued a charter has a right, to be